September 11, 2017 / 11:11 PM / 2 years ago

UPDATE 2-Australia's QBE Insurance hits reset with new CEO

* Internal candidate Patrick Regan to assume role

* Analysts expect relaxation of 2018 financial targets

* Neal presided over major profit downgrades (Adds shares, earnings downgrade, analyst comment)

By Paulina Duran

SYDNEY, Sept 12 (Reuters) - Australia’s QBE Insurance Group Ltd said on Tuesday its chief executive officer would stand down, capping a tumultuous period for the global insurer which frustrated investors with cost blowouts, profit downgrades and declining shares.

But analysts said investors should not expect a quick turnaround under a new boss, citing challenges including claims from natural disasters in North America.

Australia’s biggest insurer said CEO John Neal would stay on until the end of the year, when he would hand control of the A$14.4 billion ($11.5 billion) company to its head of Australia and New Zealand operations, Patrick Regan.

“It will likely be interpreted as a fresh beginning, a new start for QBE on the hopeful road to recovery,” Credit Suisse analysts wrote to clients.

“However we caution the expectation of any quick turnaround in QBE’s earnings.”

QBE shares rose as much as 3.3 percent after the announcement on Tuesday morning, while the broader market was up 0.5 percent. The shares are still down more than a fifth since a June profit warning.

Neal’s exit after five years in the job draws a line under a period in which QBE has stumbled through an offshore expansion, particularly in emerging markets, amid higher than expected claims payouts.

The company earned rebukes from shareholders for issuing a profit downgrade in June just weeks after reaffirming its guidance. It was one of at least four downgrades on Neal’s watch going back to 2013.

In August, it said its CEO of emerging markets would step down following a “major disappointment” in that unit’s performance - even as it reported a first-half net profit that jumped 30 percent.


QBE did not give a reason for Neal’s departure except to say it was part of a succession planning process.

Regan, the new CEO, joined QBE in 2014 as chief financial officer, before becoming head of its Australia and New Zealand unit in August last year.

Credit Suisse warned that, under a new CEO, QBE might cut its financial targets for fiscal 2018 given its wide exposure to North America, which has experienced a string of major natural disasters.

“While outside of management’s control, there remains a lot of uncertainty around QBE’s exposure to the recent industry natural peril events which we expect QBE to provide an update on in coming months,” they wrote.

Earlier this year QBE cut Neal’s annual bonus by A$553,000 because of “personal decisions” which were “inconsistent with the board’s expectations”. Neal said he was being punished for having an affair with an assistant.

$1 = 1.2481 Australian dollars Additional reporting by Chandini Monnappa in Bengaluru; Editing by Byron Kaye and Stephen Coates

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